Where Did Italy Go Wrong?

The answer: It unified.

Admittedly, this unification was forced on it. As the city-states lost their independence, it
came under foreign domination, first under Spain (1559-1713), then Austria (1713-
1796), then France, then the Austrians again. Finally, in the mid-19th century, came the
Italian Wars of Independence, unification, and birth of the Italy we know today.
But how has this led to the failure of the Italian people to fulfil their potential? Let me
explain.
Small is beautiful. In AD 1000, Europeans had a per capita income below the average
of the rest of the world. China, India, and the Muslim world were richer and had superior
technology: China had had the printing press for 400 years. Her navy 'ruled the waves'.
Even as late as 1400, the highest standards of living were found in China, in the robust
economies of places like Nanjing. But the empires of the East became centralised and
burdened with bureaucracy and taxes.
In Western Europe, however, made up of many tiny nation-states, power was spread.
There was no single ruling body except for the Roman Catholic Church. If people, ideas,
or innovation were suppressed in one state, they could quickly move to another, so
there was competition.
The cities, communes, and maritime republics that made up what we now call Italy -
Genoa, Rome, and Florence, for example - became immensely prosperous. Venice in
particular showed great innovation in turning apparently useless marsh and islands into
a unique, thriving metropolis that would become the wealthiest place in the world.
In the 16th century, the repressive forces of Roman Catholicism, which was becoming
corrupt, began to be overturned in Northern Europe. The Bible was translated into local
vernacular. The Protestant movement saw deregulation and liberalisation. Gutenberg's
printing press, invented a century earlier, was furthering the spread of knowledge and
new ideas - and thus the decentralisation of power.
Over the next two hundred years, Northern Europe caught up with Southern Europe,
which remained Catholic, and then overtook it. First, it was the Dutch, also made up of
many small states.
Then, in the 18th century, it was England, which, in spite of its union with Scotland and
its later empire building, had further dispersed centralised power by reducing the
authorities of the monarch after the civil war of 1642-51 and by linking its money to gold.
Meanwhile, out east, the Ottoman Empire and China went into a relative dark age,
centrally governed by autocratic or imperial elites, burdened with heavy taxes, slow to
react and unable to cope with the plagues and wars that befell them. By 1950, the
average Chinese, according to author Douglas Carswell, was as poor, if not poorer,
than someone living there a thousand years before.
Nothing changes... The success of small nation-states continues even today. If you look
at the World Bank's list of the richest nations in the world (as measured by GPD per
capita at purchasing power parity), you see Luxembourg, Qatar, Macau, Singapore,
Norway, Kuwait, Brunei, Switzerland, and Hong Kong.
Perhaps Macau and Hong Kong, as parts of China, should not be included, in which
case you add the US and the United Arab Emirates (similar nations appear on the
International Monetary Fund's list).

The US excepted, the common characteristic of all these nations is that they are small.
Switzerland (7.9 million) and Hong Kong (7 million) have the largest populations;
Singapore and Norway both have around 5 million. The rest are below 3.5 million.
Some of these nations - Qatar, Norway, Brunei, Kuwait, and the US - benefit because of
their oil. But why then do other oil-producing nations such as Saudi Arabia, Russia, Iran,
China, Nigeria, or Venezuela, which all have much more dubious social structures, not
feature?
Other small nations - Luxembourg and Switzerland, for example - appear on the list
because of their competitive tax rates and banking. But these are legislative options that
are open to other countries in the world.
In 1950 and 1970, the USA, with its currency tied to gold, freedoms, low taxes, property
rights, and semiautonomous states, topped the list. As its government has grown and its
power become centralised, its ranking has fallen.
Small is Beautiful
In a small state, there is less of gap between those at the top and bottom, there is more
transparency and accountability, it is harder for the state to hide things, there is more
monitoring, less waste and more dynamism. Small is flexible, small is competitive -
small really is, as economist E. F. Schumacher said, beautiful.
In that case, a large, centrally planned Europe is precisely the opposite destination to
which we should be heading. It is already bringing poverty to its people. There is, for
example, something like 65% youth unemployment in Greece at present!
What suits Germany clearly does not suit Southern Europe, yet the model is inflexible. If
innovation, prosperity, and progress are the aim of a government for its people, not only
should Europe break up, but so too should the nations within it.
Belgium could divide along the roughly linguistic lines of the Flemish-speaking north and
French-speaking south. A similar argument could be made for Spain, with Catalonia
separating and perhaps even being joined by the Catalan regions of southwest France,
if so wanted - or was allowed.
The same even applies to the United Kingdom, which should break up. The Scots have
a vote on independence next year - oh, how they should take it.
One solution to the 'Irish problem' - which, amazingly, still goes on - might be a simple
return to the four kingdoms of Ireland - Munster, Leinster, Ulster and Connacht.
And Italy? Italy should forget this pretence of unification and return to something akin to
its old decentralised Renaissance model with its independent city-states.
Even states in the US should seriously consider dropping out of the union. Their people
would thrive because of it.
If a region wants an expansive government, lots of regulation, and a large welfare state,
it can vote for it. If it wants low, transparent taxes, it can vote for that. In such a small
environment, political change can actually happen. People can get the government they
want. New parties can spring up.
Welfare is easier to administrate. It's easier to change or adapt laws and regulations.
Competition between states will improve governance and productivity. Each region
would benefit from increased pride, flexibility, dynamism, and responsibility. It would be
a return to diversity.
A country breaking up into smaller entities does not mean there need be barriers
between the two: There can still be trade; there's no need for border checkpoints and
tariffs. There can still be exchange; it just means the disintegration of large,
unnecessary, overruling bureaucratic bodies. 'Concentrated power,' said Ronald Reagan,
'is the enemy of liberty.'